In December 2025, Do Kwon, the South Korean entrepreneur behind the failed TerraUSD and Luna tokens, was sentenced to 15 years in prison. The judge rebuked him for repeatedly lying to investors before the 2022 collapse of his ecosystem, which erased an estimated $40 billion in value.
Kwon had pleaded guilty to fraud charges, and prosecutors described the episode as an 'epic' failure that devastated retail investors worldwide.
The end of an era for unbacked stablecoins
Terra's implosion triggered a chain of failures across the 2022 cycle. The sentencing, arriving the same year as the GENIUS Act's reserve requirements, underlined the industry's decisive shift away from algorithmic designs toward fully backed, verifiable stablecoins.
Algorithmic stability, revisited
The design failed under exactly the run dynamics its critics described in advance. That the warnings were public before the collapse is the enduring point.
Current stablecoin rulemaking in several jurisdictions traces directly to this episode, which is the clearest example of policy learning in the sector.
